 News-driven business cycles in small open economiesGunes Kamber, Konstantinos Theodoridis and Christoph Thoenissen Journal of International Economics, 2017, vol. 105, issue C, 77-89 Abstract: The focus of this paper is on news-driven business cycles in small open economies. We make two significant contributions. First, we develop a small open economy model where the presence of financial frictions permits the replication of business cycle co-movements in response to news shocks. Second, we use VAR analysis to identify news shocks using data on four advanced small open economies. We find that expected shocks about the future Total Factor Productivity generate business cycle co-movements in output, hours, consumption and investment. We also find that news shocks are associated with countercyclical current account dynamics. Our findings are robust across a number of alternative identification schemes. Keywords: News shocks; Business cycles; Open economy macroeconomics; Financial frictions; VAR (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:105:y:2017:i:c:p:77-89 DOI: 10.1016/j.jinteco.2016.12.005 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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